Updates to ABLE Account Rules
Achieving a Better Life Experience (ABLE) accounts are savings accounts designed for individuals with disabilities to assist them in saving money and building savings and retirement funds without damaging their ability to receive government benefits such as social security and Medicaid. Recent changes to the federal rules governing ABLE accounts now enable account holders to save more money than ever without jeopardizing their government benefits. Continue reading for details on the recent changes to the ABLE account rules, and contact a West Palm Beach special needs and elder law attorney for more information.
What are ABLE accounts?
ABLE accounts are savings accounts for people with disabilities that shield the money from affecting government benefit eligibility. ABLE accounts are available for people who have significant disabilities that were onset before the age of 26. ABLE accounts allow people to save and hold up to $100,000 while maintaining eligibility for Supplemental Security Income, and Medicaid eligibility can be retained no matter how much is in the accounts. Money saved in ABLE accounts can be used to pay for qualified disability expenses such as education, health care, transportation, and housing. Interest earned on the accounts is tax-free.
Federal and state law limits how much people can contribute to these ABLE accounts per year. Florida law caps the accounts at $418,000 total. Recent changes to the applicable laws affect the contribution limits.
Recent changes to ABLE accounts
The federal government recently passed several changes that affect how much ABLE account holders are able to retain without affecting their government benefits. The existing rules capped annual contributions to ABLE accounts to the federal gift tax exemption, which was raised to $15,000 in 2018 due to inflation. The IRS, moreover, instituted a new expansion of ABLE accounts that allows disabled individuals who work to add some of their income and wages on top of the federal gift tax exemption. People with disabilities who live in the continental U.S. can now add an additional $12,140 in income, in line with the federal poverty level; Alaska and Hawaii residents have slightly different caps.
Additionally, it is now possible to roll over money from traditional 529 college savings plans into ABLE accounts. The change is intended to help families who started college savings plans before learning that their child had a disability. ABLE account beneficiaries can also qualify for certain new tax credits for contributions to the ABLE accounts, up to $2,000 annually.
If you are in need of a skilled Florida special needs and elder law attorney, contact the seasoned, compassionate, and professional West Palm Beach trust and estates attorneys Shalloway & Shalloway at 561-686-6200.